Families Strain to Make Do, Study Finds

Sharply rising costs for housing, healthcare, transportation and child care have made it tougher for California households to make ends meet, according to a report to be released today.

Incomes required to achieve a “modest” standard of living here are generally far higher than the state’s minimum wage or the federal poverty level, said the California Budget Project, a Sacramento-based nonprofit group focusing on issues affecting low- and middle-income Californians.

“A lot of people are struggling to get by,” said Jean Ross, the organization’s executive director.

For example, a family with two working parents and two children needs an annual income of $71,377 to cover basic costs of housing, utilities, child care, transportation, food, health coverage, taxes and miscellaneous expenses, without any public assistance and extras such as vacations and retirement savings, the report said.

The hourly wage of $17.16 that each parent must earn to obtain that annual income is far above the state minimum hourly wage of $6.75 and the federal poverty threshold of $9.21 for a family of four, according to the report. A two-parent family with one working parent needs the employed person to earn $24.60 an hour, while a single-parent household needs $25.96 and a single adult requires $12.44. The figures assume families are renters, not homeowners.

By contrast, the statewide median hourly wage in 2004 was $15.06.

Thanks to various “coping” strategies, Ross said, many families survive on much less than the incomes deemed necessary to support a modest living. These strategies include doubling up on housing, living with parents, using relatives or friends for child care, going without health insurance and using credit card debt to support spending. Some households are simply moving to lower-cost regions such as the Central Valley -- or are leaving the state entirely, she said.

In any case, the report adds to the continuing debate about how to deal with California’s relatively high cost of living and the contention that the state’s residents don’t get their fair share of government programs designed to support low-income households.

The California Budget Project and others argue that income thresholds to qualify for various government programs -- such as the earned income tax credit, food stamps and state-sponsored health insurance -- are too low for Californians.

The organization supported a measure, recently passed by the California Legislature, to lift the state’s minimum wage to $7.25. California Gov. Arnold Schwarzenegger has indicated he may veto the bill.

Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy, said the report’s findings were neither surprising nor new. But its conclusions are still helpful, he said, in illustrating basic problems facing the state in coping with its high costs -- particularly for housing.

“The essential point is accurate,” Levy said.

Steve Cochrane, a regional economist at Economy.com in West Chester, Pa., said California had among the highest costs of living of any state, even after adjusting for its relatively higher average incomes.

“You do need to earn more in California to achieve the same standard of living than in almost any other state,” Cochrane said.

Rising housing costs accounted for the biggest increase in Californians’ cost of living in the last two years, Ross said. Since 2003, the statewide average cost for a two-workingparent family to rent a three-bedroom unit increased 46%, she said. Healthcare costs rose 29%, transportation jumped 18% and child care added 12%. Food, on the other hand, rose only 6%, Ross said.

Accordingly, the income needed to maintain a modest living rose 22.5% for a family with two working parents and 12.7% for a single adult in the last two years -- far higher than the 6% increase in the consumer price index in the same period.